U.S. Consumer Confidence Plunges; Lowest Reading Since 1980

Consumer sentiment dropped sharply in August, to the lowest levels since reading in the recession-marked period of May 1980, according to a reading from Thomson Reuters/University of Michigan.

The consumer sentiment reading dropped to 54,9, according to the survey, from 63.7. The reasons are clear: political uncertainty that emerged during debt ceiling talks, the S&P credit rating downgrade of the U.S., talk of another recession, and stock market turbulence.

"The drop in expectations seems to be that the political situation got peopled soured and financial markets have gotten people unsettled," said Stephen Stanley, an economist at Pierpoint Securities, in an interview with The Telegraph. "People are getting tird that we still haven't seen a recovery."

The survey's index of consumers' expectations for the next six months, a key guide for some economists in gauging future spending habits, fell to 45.7 from 56 the previous month.

Earlier Friday, the Commerce Department eased fears on Wall Street with a solid retail sales report that met expectations, showing a 0.5 rise in spending in July. The increase was small, but the markets were looking to see that spending was on the rise.

"I think the overall picture is one of still very modest growth in consumer spending," said Joshua Shapiro, chief U.S. economist for MFR, in an interview with The Financial Times. "Obviously it varies month to month, so I would not get too carried away with this data. Some of the pessimism is a little overdone here -- but the jury is still out on that."